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  • Russian Invasion of Ukraine: Global Implications

    Why the Russia-Ukraine crisis may lead to a shortage in Semiconductors?

    | Science Tech | Mains Paper 3: Awareness in various sc and tech fields

    The global supply of semiconductors is now being threatened once again by the Ukraine crisis on account of supply of two key raw materials — neon and palladium — that are at a risk of being constrained.

    What are Semiconductors?

    • A semiconductor sits between a conductor and an insulator and is commonly used in the development of electronic chips, computing components, and devices.
    • It’s generally created using silicon, germanium, and other pure elements.
    • Semiconductors are created by adding impurities to the element.

    Why are neon and palladium important for chipmaking?

    (a) Neon

    • Neon gas is used in the photolithography process that is the most common method for fabricating integrated circuits.
    • Specifically, the neon gas is used in the laser machines that carve the integrated circuits.
    • But for use of neon gas in the semiconductor industry, the gas has to reach 99.99% purity levels — which makes it a rarity.
    • More than half of semiconductor-grade neon comes from Ukrainian companies Incas and Cryoin.

    (b) Palladium

    • It is used for multiple purposes in semiconductor and electronic manufacturing.
    • It is used to coat electrodes that help control flow of electricity.
    • It is also used in plating of microprocessors and printed circuit boards — which is an essential process of chip making.
    • Russia accounts for nearly half the global supplies of palladium and the multiple trade sanctions on Moscow threaten to constrain the availability of the element.

    Why was there a shortage in semiconductors?

    • The trigger point was the beginning of the Covid-19 pandemic and the subsequent lockdowns across the world that forced chip-making facilities to shut in countries like Japan, South Korea, China and the US.
    • A key feature in a chip shortage is that it almost always causes cascading effects, given that the first one creates pent-up demand that becomes the cause for the follow-up famine.

    How is the Russia-Ukraine crisis protracting this shortage?

    • Palladium and neon are two resources that are key to the production of semiconductor chips.
    • Russia supplies over 40 per cent of world’s palladium and Ukraine produces 70 per cent of neon.

    How long will the semiconductor shortage last?

    • The answer to that question is a function of two variables:
    1. Existing stockpiles of these raw materials with chip manufacturers
    2. Time for which the crisis in Ukraine prevails
    • If a deal is not brokered in the coming months, expect the chip shortage to get worse and for industries highly dependent on them to be similarly affected.
    • This means significant risks are ahead for many automakers, electronic device manufacturers, phone makers, and many other sectors that are increasingly reliant on chips for their products to work.

     

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  • Parliament – Sessions, Procedures, Motions, Committees etc

    How is the President of India Elected?

    | Polity | Mains Paper 2: Indian Constitution – historical underpinnings, evolution, features, amendments, significant provisions and basic structure

    The presidential polls are expected to be held in July to decide on the successor of President Ram Nath Kovind, who will complete his term on July 24, 2022.

    The President of India

    • The President of India is recognised as the first citizen of the country and the head of the state.
    • The elected President of India is a part of the Union Executive along with several other members of the parliament including the Prime Minister, Attorney-General of India and the Vice – president.

    Electing the President

    • The provisions of the election of the President are laid down in Article 54 of the Constitution of India.
    • The Presidential and Vice-Presidential Election Act 1952 led to the establishment of this Constitutional provision.

    Qualifications to become the President of India

    The qualification of be the President of India are given below:

    • He/ She must be an Indian citizen
    • A person must have completed the age of 35.
    • A person must be qualified for election as a member of the House of the People.
    • Must not hold a government (central or state) office of profit
    • A person is eligible for election as President if he/she is holding the office of President or Vice-President.

    Actual course of election

    • The President of India is elected indirectly by an Electoral College following the system of proportional representation utilizing a single transferable vote system and secret ballots.
    • MPs and MLAs vote based on parity and uniformity values.

    Electoral College composition-

    (1) Legislative Assemblies of the States:

    • According to the provision of Article 333, every state’s Legislative Assembly must consist of not less than 60 members but not more than 500 members.

    (2) Council of States:

    • 12 members are nominated by the President of India based on skills or knowledge in literature, arts, science, and social service to act as the members of the Council of States.
    • In total, 238 represent act as representatives from both the States and Union Territories.

    (2) House of the People:

    • The composition of the House of People consists of 530 members (no exceeding) from the state territorial constituencies.
    • They are elected through direct election.
    • The President further elects 20 more members (no exceeding) from the Union Territories.

    Uniformity in the scale of representation of states

    To maintain the proportionality between the values of the votes, the following formula is used:

    Value of vote of an MLA= total no. of the population of the particular state/ number of elected MLAs of that state divided by 1000.

    Single vote system

    • During the presidential election, one voter can cast only one vote.
    • While the MLAs vote may vary state to state, the MPs vote always remain constant.

    MPs and MLAs vote balance

    • The number of the total value of the MPs votes must equal the total value of the MLAs to maintain the State and the Union balance.

    Quotas:

    • The candidate reaching the winning quota or exceeding it is the winner.
    • The formula sued is ‘Winning quota total number of poll/ no.of seats + 1’.

    Voters’ preference:

    • During the presidential election, the voter casts his vote in favor of his first preferred candidate.
    • However, in case the first preference candidate does not touch the winning quota, the vote automatically goes to the second preference.
    • The first preferred candidate with the lowest vote is eliminated and the votes in his/her favor are transferred to the remaining candidates.

    Why need Proportional representation?

    • The President of India is elected through proportional representation using the means of the single transferable vote (Article 55(3)).
    • It allows the independent candidates and minority parties to have the chance of representation.
    • It allows the practice of coalition with many voters under one government.
    • This system ensures that candidates who are elected don’t represent the majority of the electorate’s opinion.

    Why is President indirectly elected?

    If Presidents were to be elected directly, it would become very complicated.

    • It would, in fact, be a disaster because the public doesn’t have the absolute clarity of how the president-ship runs or if the candidate fits the profile of a president.
    • Another reason why the direct election system isn’t favorable is that the candidate running for the president’s profile will have to campaign around the country with the aid of a political party.
    • And, this will result in a massive political instability.
    • Moreover, it would be difficult and impossible for the government to hand out election machinery (given the vast population of India).
    • This will cost the government financially, and may end up affecting the economy as well.
    • The indirect election system is a respectable system for the First Man of India (rightly deserving).
    • The system/method of indirect electing of the president also allows the states to maintain neutrality and minimize hostility.

     

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  • Disinvestment in India

    National Land Monetisation Corporation (NLMC)

    | Economics | Mains Paper 3: Indian Economy

    The Union Cabinet has approved the creation of the National Land Monetisation Corporation (NLMC), the Special Purpose Vehicle (SPV) announced in the Union Budget 2021-22 to carry out monetisation of government and surplus land holdings of public sector undertakings (PSU).

     What is the NLMC?

    • The NLMC will be a firm, fully owned by the government, to carry out the monetisation of government and public sector assets in the form of surplus, unused or underused land assets.
    • It will fall under the administrative jurisdiction of the Ministry of Finance and will be set up with an initial authorised share capital of ₹5,000 crore and a paid-up capital of ₹150 crore.
    • Apart from monetising underutilised or unused land parcels of Central Public Sector Enterprises (CPSEs), the Corporation will also facilitate the monetisation of assets belonging to PSUs that have ceased operations or are in line for a strategic disinvestment.
    • The surplus land and building assets of such enterprises are expected to be transferred to the NLMC, which will then hold, manage and monetise them.

    What will it do?

    • The setting of the NLMC will speed up the closure process of the CPSEs and smoothen the strategic disinvestment process.
    • It will also enable productive utilisation of these under-utilised assets by setting in motion private sector investments.
    • It will boost new economic activities such as industrialisation, boosting the local economy by generating employment and generating financial resources for potential economic and social infrastructure.
    • Besides managing and monetising, the NLMC will act as an advisory body and support other government entities and CPSEs in identifying their surplus non-core assets.
    • It will help monetising them in an efficient and professional manner, maximising the scope of value realisation.

    What does monetization mean?

    • When the government monetises its assets, it essentially means that it is transferring the revenue rights of the asset (could be idle land, infrastructure, PSU) to a private player for a specified period of time.
    • In such a transaction, the government gets in return an upfront payment from the private entity, regular share of the revenue generated from the asset, a promise of steady investment into the asset, and the title rights to the monetised asset.
    • There are multiple ways to monetise government assets; in the case of land monetisation of certain spaces like offices, it can be done through a Real Estate Investment Trust (REIT).

    What are REITs?

    Ans: REITs a company that owns and operates a land asset and sometimes, funds income-producing real estate. Assets of the government can also be monetised through the Public Private Partnerships (PPP) model.

    Why need monetization?

    • There are different reasons why the government monetises its assets.
    • One of them is to create new sources of revenue.
    • The economy has already been hit due to the coronavirus pandemic and revenues are essential to fulfil the Modi government’s target of achieving a $5 trillion economy.
    • Monetisation is also done to unlock the potential of unused or underused assets by involving institutional investors or private players.
    • Thirdly, it is also done to generate resources or capital for future asset creation, such as using the money generated from monetisation to create new infrastructure projects.

    How will the NLMC function?

    • The firm will hire professionals from the private sector with a merit based approach, similar to other specialised government companies like the National investment and infrastructure Fund (NIIF) and Invest India.
    • This is because asset monetisation of real estate requires expertise in valuation of property, market research, investment banking, land management, legal diligence and other related skill sets.
    • The NLMC will undertake monetisation as an agency function and is expected to act as a directory of best practices in land monetisation.

    How much land is currently available for monetisation?

    • According to the Economic Survey 2021-2022, as of now, CPSEs have put nearly 3,400 acres of land on the table for potential monetisation.
    • They have referred this land to the Department of Investment and Public Asset Management (DIPAM).
    • As per the survey, monetisation of non-core assets of PSUs such as MTNL, BSNL, BPCL, B&R, BEML, HMT Ltd, Instrumentation Ltd etc are at different stages.

    What are the possible challenges for NLMC?

    (a) Volatile market situation

    • The performance and productivity of the NLMC will also depend on the government’s performance on its disinvestment targets.
    • In FY 2021-22, the government has hardly been able to raise expected amounts through various forms of disinvestment.
    • For example, the Life Insurance Corporation IPO, which was supposed to raise ₹60,000 crore is now shrouded in uncertainty owing to the Russia-Ukraine crisis making stock markets volatile.
    • If the IPO does not hit the markets by the end of March, the government would be missing its disinvestment targets by a wide margin.

    (b) Issues with transfer of rights

    • The process of asset monetisation does not end when the government transfers revenue rights to private players.
    • Identifying profitable revenue streams for the monetised land assets, ensuring adequate investment by the private player and setting up a dispute-resolution mechanism are also important tasks.

    (c) Unattractiveness of PPP Model

    • Posing as another potential challenge would be the use of Public Private Partnerships (PPPs) as a monetisation model.
    • For instance, the results of the Centre’s PPP initiative launched in 2020 for the Railways were not encouraging.
    • It had invited private parties to run 150 trains of the Indian Railways but when bids were thrown open, nine clusters of trains saw no bidders.

     

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  • Blockchain Technology: Prospects and Challenges

    Virtual Digital Assets

    | Economics | Mains Paper 3: Indian Economy

    The government has clarified that investors won’t be allowed to offset losses in one crypto asset against gains in another, and that crypto mining infrastructure costs will not be included in the cost of acquisition to be claimed as a deduction.

    How are crypto investments taxed?

    • The Union Budget 2022-23 in February proposed that gains from virtual digital assets or crypto assets would be taxed at 30% irrespective of the individual’s income tax slab.
    • In addition, a 1% tax deducted at source or TDS was introduced on the transfer of such assets.
    • The government did not say if crypto assets are to be treated as currency, commodity, or security, and a clarification is expected in due course via separate legislation.
    • Gifting of crypto assets to non-relatives is also taxed in the hands of the recipient if the value exceeds ₹50,000 in a year.

    How does crypto tax differ from others?

    • If listed shares are sold within 12 months of purchase, short-term capital gains (STCG) tax is applied on the gains, while beyond one year, long-term capital gains (LTCG) tax is levied.
    • STCG is levied at 15.6%, including cess, while LTCG for gains over ₹1 lakh is 10.4%, including cess.
    • There is no provision of long-term or short-term crypto assets, while gains are taxed at a flat rate of 30%.
    • Investors in equities can offset the loss in one stock against another, while they can carry forward both short-term and long-term loss for eight assessment years.
    • This has not been allowed in crypto.

    How will crypto tax impact investors?

    • In a fiscal year, if an investor had made gains in bitcoin and losses in ether, he or she will have to pay tax at 30% on gains in bitcoin.
    • Further, the absence of loss set-off provision would cause a double whammy —paying taxes on gains and no offset of losses.
    • Tax experts believe that in certain cases, the effective rate of taxation can even cross 100% on crypto investments.

    How will miners be affected?

    • The government has clarified that mining infrastructure will also not be eligible to be deducted as the cost of acquisition.
    • So far, it was understood by some that crypto generated during the ‘mining’ process is taxable only on the profits, after accounting for mining expenses such as electricity.
    • But with the latest explanation, a 30% tax plus cess and surcharges will be levied on such transactions.
    • Experts believe that crypto mining operations would become non-profitable under the current announcement.

    Will crypto tax trigger an investor exodus?

    • The crypto industry has been unequivocal in criticizing the tax proposals.
    • Thanks to the tearing rally in crypto assets over the past two years, it is estimated by some that more than 20 million Indian investors have poured more than ₹1 trillion into cryptos.
    • However, the industry leaders fear that the lack of provision to offset losses will drive away users from KYC-compliant exchanges and platforms to the underground peer-to-peer grey market, which would defeat the purpose of regulation.

     

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  • Foreign Policy Watch: India-Australia

    Deepening investments in Australia-India strategic, economic, and community ties

    | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Context

    On March 21, Prime Ministers of India and Australia held their Virtual Summit and took stock of the pace of implementing the Australia-India Comprehensive Strategic Partnership.

    India-Australia relations

    • Since we elevated our relationship in 2020, we have advanced practical actions on cyber and critical technologies, maritime affairs, defence ties, economic and business links and Quadrilateral cooperation.
    • The two Prime Ministers announced a range of tangible and practical initiatives spanning the breadth of our shared economic, strategic, and regional interests.

    Areas of cooperation

    • Energy partnership: Both countries are working on a new and renewable energy partnership, to support the development of technologies such as green hydrogen and ultra-low cost solar.
    • We are also supporting research and investment to unlock Australian critical minerals for Indian advanced manufacturing.
    • We will boost collaboration on innovation, science and entrepreneurship, to scale up ideas that address global challenges.
    • Space sector: We are also increasing investments into our countries’ rapidly growing space sectors.
    • We are establishing the Australia-India Centre of Excellence for Critical and Emerging Technology Policy — and a Consulate-General — in Bengaluru.
    • Australians value highly the Indian diaspora and student contributions to its community — whether economic, social, or cultural.
    • Australia and India are also working to ensure a peaceful and stable region.
    • Both countries are committed to a free and open Indo-Pacific.
    • In our defence relationship, there is an enhancement in information sharing and operational cooperation.
    • Such arrangements also help continue delivering quality humanitarian support to the region, seen recently when India helped Australia’s Pacific family, Tonga and Kiribati.

    Conclusion

    These investments in strategic, economic, and community ties show what we can achieve when two multicultural democracies join in a spirit of trust and understanding.

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  • Oil and Gas Sector – HELP, Open Acreage Policy, etc.

    Russia’s offer of cheaper oil is tempting, but India must be cautious

    | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    Context

    With oil above $100, the government now has to spend twice as much to import oil as it did earlier. Russia has offered to sell oil at lower prices to India. It is a hard temptation for India to resist. But one that comes with profound and long-lasting consequences.

    Issues in buying oil from Russia

    1] Impact on India’s export due to threat of the secondary sanction by the US

    • The demise of the Soviet Union made it easier for India to abandon the Soviet-influenced ideology of a planned economy and veer towards the American version of a market economy.
    • Now, in the reverse ideological direction, Russia’s offer of cheaper oil has hidden and direct costs that India will have to deliberate upon.
    • Whenever global crude oil prices have risen above $100 in the past, India was able to cushion that shock primarily through growth in exports.
    • When oil prices were similarly high, exports rose to nearly 25 per cent of nominal GDP, which helped India withstand the shock.
    • However, exports now have fallen dramatically to 18 per cent of GDP, which must be revived.
    • The US is India’s biggest export market.
    • The US has already cautioned India about abetting Russia by buying Russian oil.
    • It remains to be seen if the US will impose secondary sanctions against India for buying discounted Russian oil, but that threat looms large.

    2] Cascading de-dollarisation

    • With US sanctions against Russia, it will insist on payment in rubles.
    • If India is forced to accept trading in rubles with Russia, then it is very likely that China, which is India’s second-largest trading partner, may also insist on payments in Chinese yuan.
    • Saudi Arabia may also insist on trading in a currency other than the US dollar.
    • This cascading “de-dollarisation” phenomenon will further irk and antagonise the US, since it weakens the dollar’s status as the world’s reserve currency.
    • If India is forced to purchase Russian oil in rubles and potentially trade in yuan with China and others, it can catapult India into the centre of a geo-economic war that it can ill afford.

    Opportunity for India

    • The Russia-Ukraine conflict can be an opportunity for India to step up and capture global market share in goods and services.
    • There is already talk of India capitalising on wheat exports, albeit a tiny share of India’s overall exports, as a fallout of global sanctions against Russian wheat.

    Conclusion

    Exports remain India’s biggest hope for a long-term sustainable economic recovery with ample job creation. India cannot risk being isolated in future global trade for near-term discounted oil deals with Russia.

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  • Foreign Policy Watch: India-United States

    On South Asia, US must reorient itself

    | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India,India & Its Neighborhood – Relations

    Context

    On the external front, Russia’s Ukraine war and the Sino-Russian alliance are setting the stage for a reordering of South Asia’s great power relations.

    Opportunity for the US in South Asia

    • If it looks beyond the region’s immediate response to the war in Ukraine, Washington can seize the current opportunity to elevate the US’s salience for the Subcontinent in partnership with India.
    • The Indo-Pacific strategy offers new pathways for the US to limit the traditional economic and military weight of China and Russia in the Subcontinent.

    Three regional trends in South Asia

    1] Decline of Pakistan’s influence

    • In the wake of the missile accident, Islamabad moved to seek international intervention, including from the UN Secretary-General.
    • But there were few takers for this old South Asian formula, except in Beijing.
    • Underlining the peremptory dismissal of Islamabad’s concerns is a deeper trend — the relative decline of Pakistan’s international standing.
    • Since his election, US President Joe Biden has refused to call Imran Khan, who runs a “major non-NATO ally”; high-level visitors from Washington now skip Pakistan during South Asia visits.
    • Chinese and Russian official visitors are among the few to combine trips to Delhi and Islamabad.
    • Islamabad’s decline after the US withdrawal from Afghanistan is likely to accelerate amidst Pakistan’s deepening domestic political chaos.
    • With an economy that is smaller than that of Bangladesh and limited prospects for rapid growth in the coming years, Pakistan will find it hard to match its traditional claim for “strategic parity” with India.

    2] Declining interest in China’s Belt and Road Initiative in South Asia

    •  Just a couple of years ago, China’s commercial march into South Asia seemed unstoppable. Not any longer.
    • Troubles in Pakistan and Sri Lanka: Pakistan and Sri Lanka, which embraced the BRI with great gusto, are South Asia’s two worst-performing economies.
    • The deepening economic crises are compelling the elites of Pakistan and Sri Lanka to focus on non-Chinese financial sources to stabilise their economies.
    • Sri Lanka, which ostentatiously refused to accept $480 million developmental assistance from the US in 2020, is now desperately looking for hard currency support for its sinking economic fortunes.
    •  In Nepal, the dominant communists had made political opposition to US infrastructure assistance of $500 million as a life and death issue for a decade.
    • At the end of last month, Nepal’s parliament ratified the US loan that will facilitate Nepal’s infrastructure development and its economic integration with the Subcontinent.

    3] The growing possibilities for US security cooperation with the Subcontinent

    • During the Cold War, the US military engagement was limited to Pakistan.
    • In the 21st century, there has been a steady expansion of US defence cooperation with India.
    • The current focus on the Indo-Pacific is getting Washington to modernise the defence partnerships with the smaller countries of the region.
    • The Trump Administration discarded the traditional obsession with Pakistan and began to recognise the strategic significance of the smaller South Asian states for its Indo-Pacific strategy.
    • The visit of US Undersecretary of State to Bangladesh over the weekend saw progress towards signing the so-called GSOMIA (General Security of Military Information Agreement) that codifies the commitment to protect classified military information.

    Conclusion

    Reversing that must necessarily involve deeper security cooperation with the region and developing alternatives to military dependence on Beijing and Moscow. This is best done in partnership with Delhi.

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  • Pension Reforms

    SC backs Centre’s OROP scheme

    Schemes | Governance | Mains Paper 2: Government Scheme/Policies

    The Supreme Court has upheld the Centre’s one rank, one pension (OROP) scheme for the armed forces.

    What is the news?

    • The Supreme Court has ruled that there was “no constitutional infirmity” in the way the government had introduced ‘one rank, one pension’ (OROP) among ex-service personnel.
    • The scheme, notified by the Defence Ministry on November 7, 2015, was challenged by Indian Ex-Service Movement, an association of retired defence personnel.

    What is OROP Scheme?

    • OROP means that any two military personnel retiring at the same rank, with the same years of service, must get an equal pension.
    • While this might appear almost obvious, there are several reasons why two military personnel who may have retired at the same rank with the same years of service, may get different pensions.

    Need for the scheme

    Military personnel across the three services fall under two categories, the officers and the other ranks.

    • Early age of retirement: The other ranks, which are soldiers, usually retire at age 35.
    • No benefits from pay commissions: Unlike government employees who retire close to 60, soldiers can thus miss out on the benefits from subsequent pay commissions.
    • Salary based pension: And since pensions are based on the last drawn salary, pensions too are impacted adversely.
    • Ranks based discrimination: The age when officers in the military retire depends upon their ranks. The lower the rank, the earlier they superannuate.
    • Liability against the sacrifice: It was argued that early retirement should not become an adverse element for what a soldier earns as pension, compared with those who retire later.

    Earlier pension mechanism

    • From 1950 to 1973, there was a concept known as the Standard Rate of Pension, which was similar to OROP.
    • In 1974, when the 3rd Pay Commission came into force, certain changes were effected in terms of weightage, additional years of notion service, etc., with regard to pensions.
    • In 1986, the 4th Pay Commission’s report brought further changes.
    • What ultimately happened was that the benefits of the successive pay commissions were not passed to servicemen who had retired earlier.
    • Pensions differed for those who had retired at the same rank, with the same years of service, but years apart.

    Demand for OROP

    • Ex-servicemen demanded OROP to correct the discrepancy.
    • Over the decades, several committees looked into it.
    • The Brig K P Singh Deo committee in 1983 recommended a system similar to Standard Rate of Pension, as did Parliament’s standing committees on defence.
    • The Narendra Modi government notified the current OROP scheme in November 2015, and it was made applicable from July 1, 2014.

    Issues with OROP

    • During the OROP protests of 2013-15, it was argued repeatedly that meeting the demand would be financially unsustainable.
    • Because soldiers retire early and remain eligible for pension for much longer than other employees, the Defence Ministry’s pension budget is very large, impacting capital expenditure.
    • The total defence pensioners are 32.9 lakh, but that includes 6.14 lakh defence civilian pensioners.
    • The actual expenditure of the Defence Ministry on pensions was Rs 1.18 lakh crore in 2019-2020.
    • The Defence Ministry’s pension-to-budget ratio is the highest among all ministries, and pensions are more than one-fifth of the total defence budget.
    • When the late Manohar Parrikar was Defence Minister, it was estimated that a one-time payout of Rs 83,000 crore would be needed to clear all past issues.

    Challenge to OROP

    • The petitioners contended that the principle of OROP had been replaced by ‘one rank multiple pensions’ for persons with the same length of service.
    • They submitted that the government had altered the initial definition of OROP and, instead of an automatic revision of the rates of pension.
    • Under this, any future raising of pension rates would be passed on to past pensioners — the revision would now take place at periodic intervals.
    • According to the petitioners, this was arbitrary and unconstitutional under Articles 14 and 21.

    What has the SC ruled now?

    • The court did not agree with the argument that the government’s 2015 policy communication contradicted the original decision to implement OROP.
    • It said that “while a decision to implement OROP was taken in principle, the modalities for implementation were yet to be chalked out.
    • The court also said that while the Koshyari Committee report furnishes the historical background of the demand, and its own view on it, it cannot be construed as embodying a statement of governmental policy.
    • It held that the OROP policy “may only be challenged on the ground that it is manifestly arbitrary or capricious”.

     

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  • Foreign Policy Watch: India-Sri Lanka

    Sri Lanka’s aggravating Economic Crisis

    | International Relations | Mains Paper 2: India & Its Neighborhood – Relations

    Sri Lanka’s economic crisis is aggravating rapidly, putting citizens through enormous hardship.

    Reasons for the Crisis

    The first wave of the pandemic in 2020 offered early and sure signs of distress.

    • In-migration: Thousands of Sri Lankan labourers in West Asian countries were left stranded and returned jobless.
    • Shut-down: Garment factories and tea estates could not function, as infections raged in clusters. Tourism sector to saw a big dip.
    • Domestic job losses: Thousands of youth lost their jobs in cities as establishments abruptly sacked them or shut down.
    • Forex decline: It meant that all key foreign exchange earning sectors, such as exports and remittances, along with tourism, were brutally hit.

    Policy failures of Lankan govt

    • No strategy: The lack of a comprehensive strategy to respond to the crisis then was coupled with certain policy decisions last year.
    • Ill-advised policies: It included the government’s abrupt switch to organic farming —widely deemed “ill-advised”, further aggravated the problem.
    • Food hoarding: The government declared emergency regulations for the distribution of essential food items. It put wide import restrictions to save dollars which in turn led to consequent market irregularities and reported hoarding.
    • Continuous borrowing: Fears of a sovereign default rose by the end of 2021, with the country’s foreign reserves plummeting to $1.6 billion, and deadlines for repaying external loans looming.

    What is happening on the ground?

    • At the macro-economic level, all indicators are worrisome.
    • The Sri Lankan rupee, which authorities floated this month, has fallen to nearly 265 against the U.S. dollar. Consumer Price inflation is at 16.8% and foreign reserves stood at $2.31 billion at the end of February.
    • Sri Lanka must repay foreign debt totalling nearly $7 billion this year and continue importing essentials from its dwindling dollar account.
    • Sri Lanka will incur an import bill of $22 billion this year, resulting in a trade deficit of $10 billion.

    Implications on Public

    • For citizens, this means long waits in queues for fuel, a shortage of cooking gas, contending with prolonged power cuts in many localities and struggles to find medicines for patients.
    • In families of working people, the crisis is translating to cutting down on milk for children, eating fewer meals, or going to bed hungry.

    How is India helping?

    • Acting in the Neighbourhood’s first policy, India stands with Sri Lanka.
    • $1 billion credit line signed for supply of essential commodities. Key element of the package of support extended by India.
    • Beginning January 2022, India has extended assistance totalling $ 2.4 billion — including an $400 million RBI currency swap and a $500 million loan deferment.

    Chinese lure of aid

    • China is considering Sri Lanka’s recent request for further $2.5 billion assistance, in addition to the $2.8 billion Beijing has extended since the outbreak of the pandemic.

    How is India’s assistance being viewed in Sri Lanka?

    • Sacking key infra projects: The leadership has thanked India for the timely assistance, but there is growing scepticism in Sri Lankan media and some sections, over Indian assistance “being tied” to New Delhi inking key infrastructure projects.
    • Deep incursion: They mainly include the strategic Trincomalee Oil Tank Farm project; the National Thermal Power Corporation’s recent agreement with Ceylon Electricity Board to set up a solar power plant in Sampur, with investment from India’s Adani Group.
    • Diplomatic blackmail: SL media accuses New Delhi was resorting to “diplomatic blackmail”. The political opposition has accused the Adani Group of entering Sri Lanka through the “back door”, avoiding competitive bids and due process.

    Options available for SL

    • Sri Lanka is hoping for a Rapid Finance Instrument (RFI) facility as well as a larger Extended Fund Facility (EFF) from the IMF to deal with its foreign currency shortages.
    • IMF had assured to help the country with an amount of $300 million to $600 million.

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  • Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

    India ranks 136th in the World Happiness Report 2022

    IOCR | Trivia | Mains Paper 1: Salient features of Indian Society

    India ranks 136th in the World Happiness Report 2022, while Finland becomes the happiest country for the fifth consecutive year.

    One can definitely question the credibility of such reports whenever India is being grouped with some African countries that too below Pakistan.

    World Happiness Report

    • The WHR is an annual publication of the UN Sustainable Development Solutions Network.
    • It measures three main well-being indicators: life evaluations, positive emotions, and negative emotions (described in the report as positive and negative affect).
    • Since 2011, the World Happiness Report (WHR) is released every year around the time of International Day of Happiness on March 20.
    • It was adopted by the UN General Assembly based on a resolution tabled by Bhutan.

    How is the WHI derived?

    • The ranking is done on a three-year average based on surveys of ‘Life Evaluation’ conducted by Gallup World Poll which surveys around 1000 people from each country to evaluate their current life on a scale of 0-10.
    • On this scale, 10 marks the best possible and 0 as the worst possible life.
    • Further, six key variables GDP per capita, social support, healthy life expectancy, freedom, generosity, and corruption contribute to explaining life evaluations.

    Top performers this year

    • The top five countries in the list are from Europe.
    • While the United States held the 16th spot in the happiest countries list.
    • Following Finland, Denmark bagged the second rank, while Iceland and Switzerland stood at third and fourth rank.
    • The Netherlands was at the fifth rank in the list.
    • Meanwhile, Luxembourg, Norway, Israel, and New Zealand were the remaining countries in the top 10.

    Dismal performers

    • Afghanistan held the last position of 146th in the list, with Lebanon (145th), Zimbabwe (144th), Rwanda (143rd), and Botswana (142nd) following.
    • Bangladesh has improved its ranking by seven notches on the WHI from 101 last year to 94 in 2022 out of 146 countries included in the report.

     

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